In This Issue

• ABA Calls on Congress to Pursue National Data Protection Standards
• ABA Seeks Greater Transparency on International Standard Setting Process
• ABA Publishes Staff Analysis of Financial Choice Act
• CFPB Seeks Information on Small Business Lending Market
• New Article Explores How Banks Use APIs to Balance Security, Openness

• House Health Care Bill Includes Several HSA Provisions

ABA Calls on Congress to Pursue National Data Protection Standards

In response to the ever-increasing threat of data breaches and cyber fraud, ABA Monday called on Congress to pursue national data protection standards for companies that handle consumers’ sensitive financial data.

Using data from the Identity Theft Resource Center, ABA illustrated the difference between the financial industry, which is held to high data protection and privacy standards under current laws and regulations, and other industries that are not held to such standards. The association pointed out that just 0.2 percent of all data breaches in which customer records were exposed during 2017 can be attributed to the financial sector, while 81.3 percent are attributable to businesses including retailers.

“It’s time to get serious about building a security infrastructure that brings banks, payment networks and retailers together to safeguard sensitive financial data,” ABA said. “It’s time to pass a strong, consistent national standard for fighting data breaches and give consumers the protection they deserve.” Read more.

ABA Seeks Greater Transparency on International Standard Setting Process

In an eighth white paper to the Treasury Department Monday, ABA called for a reevaluation of the current global regulatory regime and for improvements that would make international standards more workable and supportive of economic growth, both domestically and abroad.

ABA noted that the current process for global standard setting lacks transparency and accountability, pointing as an example to the Basel rules that were developed with little public input. As a result, the implementing regulations in many cases “are inconsistent with U.S. economic and financial interests,” such as Basel’s Liquidity Coverage ratio, which is based on assumptions that have not historically held true for the U.S. market, and the Basel capital rules on mortgage servicing assets, which impose broad constraints on MSAs and have caused many banks to scale back their mortgage servicing operations, ABA said.

To promote greater transparency, ABA recommended that regulators publish advanced notices of proposed rulemaking before undertaking any international standard-setting project. The ANPRs should provide detail on specific issues or problems to be addressed by the international standards, the nature of the standards being considered for application in the U.S. or affecting U.S. citizens or businesses, the various options likely to be considered and the anticipated general impact of those options on U.S. citizens, businesses and the economy. Implementing regulations should be tailored to accommodate the diverse business models in the U.S. banking industry, ABA added.

In addition, ABA urged regulators to pause and conduct a careful review of all implementing regulations that resulted from global standard setting since the financial crisis to ensure that the rules are not standing in the way of economic growth. The association also called for a redesign of the international peer review program so that it focuses on the objectives of international standards, rather than compliance minutiae. Read the white paper. For more information, contact ABA's Wayne Abernathy.

ABA Publishes Staff Analysis of Financial Choice Act

 
ABA has published a staff analysis of the Financial Choice Act, Rep. Jeb Hensarling’s sweeping bill aimed at reforming parts of the Dodd-Frank Act’s extensive supervisory regime and providing regulatory relief. The bill was advanced last week by the House Financial Services Committee in a party-line vote of 34-26. While the association acknowledged that there are several issues that will require closer consideration as the legislation moves forward, it called the bill “a good step forward” in bringing much-needed regulatory relief to banks.

A central component of the bill is the “regulatory off-ramp” for larger institutions subject to DFA’s heightened prudential standards and Basel III’s capital and liquidity standards, provided those institutions elect to maintain a 10 percent non-risk weighted leverage ratio. ABA noted, however, that the restrictions around the exemption--including the rigidness of the leverage ratio requirement--could cause some well-run banks to decide against opting in, thus missing out on the chance for regulatory relief. In addition, ABA pointed out that severe penalties would be imposed on banks that fall below the 10 percent standard, including the loss of all reg relief if the capital is not restored to the 10 percent level.

The Choice Act also focuses on ending “too big to fail” by replacing DFA’s Orderly Liquidation Authority with a new Bankruptcy Code designed to accommodate the failure of a large, complex financial institution. ABA reiterated its longstanding view that no bank is or should be too big to fail, and encouraged Congress to consider whether repealing the Order Liquidation Authority in its entirety would eliminate some tools necessary for managing financial stability.

Also targeted for reform by the bill is the Consumer Financial Protection Bureau, which would be renamed the Consumer Law Enforcement Agency and stripped of its examination powers and “UDAAP” enforcement authority. The agency would be led by a single director removable at will by the president, and subject to the congressional appropriations process.

Finally, ABA expressed support for a number of regulatory relief provisions included in the bill that are not tied to a specific leverage ratio, many of which are included in the association’s Blueprint for Growth. These include a Qualified Mortgage safe harbor for mortgage loans held in portfolio, more tailored supervision based on an institution’s risk profile and business model, greater flexibility for mutual savings associations, relief from various reporting requirements, and repeals of both the Volcker Rule and the Durbin Amendment. Read the staff analysis. Read an executive summary of the Choice Act.

CFPB Seeks Information on Small Business Lending Market

 
As it prepares to implement Section 1071 of the Dodd-Frank Act, the Consumer Financial Protection Bureau Wednesday morning issued a request for information on various aspects of the market for small business loans. Section 1071 calls for the bureau to collect data on women-owned, minority-owned and small businesses.

The bureau sought information in five broad categories: the definition of a small business; what data points the bureau should require to be collected; what lenders should be encompassed by the data collection; what kinds of financial products and credit are offered to small businesses; and privacy concerns related to the data collection. Comments are due 60 days after the filing is published in the Federal Register. The CFPB also released a preliminary report providing the agency's perspective on the market for lending to small, minority-owned and woman-owned firms and gaps in its understanding.

In a recent white paper for the Treasury Department in response to President Trump's executive order on financial regulation, ABA said that Section 1071's conflation of consumer and commercial lending is misguided and that Congress should repeal the provision. "We recommend the elimination of any vestige of Bureau regulatory, supervisory or enforcement authority over commercial credit or other commercial account and financial services," ABA said. The association is following the CFPB's Section 1071 rulemaking process closely and will provide additional information and analysis as it becomes available.

• Read the request for information.
• Read the CFPB report.
• Read the ABA white paper.

New Article Explores How Banks Use APIs to Balance Security, Openness

In the latest free article posted on the ABA Banking Journal site, ABA's Tyler Mondres explores how banks of different sizes are using application programming interfaces, or APIs, to balance demand for consumer data with privacy and security.

The article illustrates several current uses for APIs, from data portals (as used by J.P. Morgan Chase and Wells Fargo to allow customers to securely access their bank data through third-party services like Mint) to developer portals, such as BBVA's, that allow third parties to develop new technological solutions in a bank-controlled secure environment.

"As customers use these digital services, they are creating an unprecedented amount of data," writes Mondres. "This data can facilitate the creation of new banking products and services and has created a market for consumer financial service data. To enable customers to access these services, banks are actively developing ways to facilitate safe and secure data transmission via APIs." Read the article.

House Health Care Bill Includes Several HSA Provisions

The American Health Care Act of 2017, which was passed by a 217 to 213 vote in the House last Thursday, contains several provisions that would expand Americans’ ability to access health savings accounts.

Among other things, the bill would increase the annual HSA contribution limit; allow both spouses to make catch-up contributions to one HSA beginning in 2018; lower the tax penalty for non-qualified HSA distributions made after Dec. 31, 2017; and delay the so-called Cadillac tax on high-cost employer-sponsored health plans until 2026. It would also repeal the prescription requirement for over-the-counter medications, making withdrawals from HSAs tax-free beginning in the 2018 tax year.

ABA’s HSA Council has been actively involved in ensuring that healthcare reform includes an expanded role for health savings accounts. In March, members of the council attended a meeting with Vice President Mike Pence and Secretary of Health and Human Services Tom Price to advocate for changes to current policies surrounding HSAs. For more information, contact ABA’s Kevin McKechnie.